This is a big question – will all this activity and the rise in property prices lead to a bursting soap bubble? – but state economist Amanda Rector is not watching him yet.
“The current conditions are different from any housing downturn before the Great Recession,” said the Rector. “Mortgage lending, for example, uses much stricter lending standards, and instead, the rapid rise in prices is now largely driven by a dire shortage of affordable housing. The problem I’m tracking is the supply of housing for the labor force, as a shortage of it could keep people from moving to Maine in search of work. “
Andrew Crowley, an assistant professor at the University of Maine School of Economics who founded the Maine Regional Economic Forecasting Lab, does not see a “huge” drop ahead, similar to the Great Recession, but expects a general decline in prices with one caveat.
“Some areas will still remain high,” he said. “While it might seem like cities were hit hard during the pandemic, they still have amenities that will always keep them popular.”
At the time, in 2008, the average sale price of homes in Maine was $ 180,000, but according to statistics from the Maine Association of Realtors, it fell and recovered in seven years.
After several more years of sustained growth, start purchasing during the 2020 pandemic, with the average selling price up nearly 14% to $ 256,000.
Figures for the year have not been computed to date, but between March and May 2021, the statewide average selling price rose nearly 22% to $ 285,000 over the same period last year.
Who’s buying is also changing dramatically: according to MAR, between July 2019 and May 2020, 23.5% of home buyers here were out of state.
From July 20 to May 0, 2021, this is 33.4%.
“Maine was clearly seen as a safe place in the midst of the pandemic as sales were increasing in all parts of the state, including rural areas,” said Rector. “We still don’t have enough information on the demographics and intentions of (recent out of state) buyers to know if this is part of a steady increase in state migration or an increase in the number of under-year residents who saw this as an opportunity to buy a second home.”
There is room for optimism in the April report of the Maine Economic Consensus Commission, “in the coming years as teleworking becomes part of the ‘new normal’ and people look for less densely populated places to live.”
But it could bring mixed news for office space, as well as increase pressure on affordable housing.
In general, consumption during the pandemic was much higher than originally anticipated, Crowley said, but this creates a double-edged sword: supporting the economy but contributing to inflation.
“Ideally, more housing will enter the market – as supply increases, price increases should slow down,” said the Rector. “Some growth in home sales may also be due to low interest rates; as these rates increase, this may start to reduce sales, but this will not help solve the problem of housing affordability, as lower prices can be offset by higher borrowing costs.
“There is no definite answer to the question of how this will affect the economy,” she added. “As with so many things, there are both positives and negative sides to the recent growth in property sales.”